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BPO segment awaits merger boom

Calcutta, Oct. 4: The BPO (business process outsourcing) industry is likely to see a spate of mergers and acquisitions within the next two years as global companies ramp up their Indian operations.

“The next few years will see larger players in the BPO segment acquiring smaller companies and software solution providers in a bid to tap the potential of the market,” says Kapil Dev Singh, country manager of IDC India. He cites the acquisition of Spectramind by infotech major Wipro as an example.

The BPO industry had been quite active last year, with a number of contracts being awarded and setting up operations by global players.

“The industry will grow by 60 per cent this year compared with the $ 2.1 billion revenue earned during January–December 2002,” says Singh. IDC predicts that the industry would grow to revenues of $ 7-8 billion by 2008.

IDC estimates that IT-enabled services will grow at a rate of 52.4 per cent between 2002-06, with export shares rising from 23 per cent in 2002 to 42 per cent in 2006. The industry is expected to provide employment to 0.6 million people by 2007 from the present 0.15 million.

The demand for BPO services in functional areas like finance, marketing and sales, human resources and administration is expected to remain high as worldwide corporates adopt measures to prune costs across functions.

The industry has also witnessed capital infusions in terms of infrastructure, people and processes and was almost operating at 64 per cent of total installed capacity, which IDC predicts will rise to 78 per cent by 2007.

At present, Indian companies are providing services like customer care and low-end data entry back office processing services to their, which are just a part of the processes and not the entire function.

“Though back office processing and customer care would remain breadwinners for Indian BPO service providers, they will graduate to complete process services to help clients achieve their strategic business transformation. Moving up the value chain will help the service providers fetch better prices, improved operating margins and enduring client relationships,” added Singh.

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